The Group of Ministers (GoM) headed by Agriculture Minister Sharad Pawar on Thursday rejected the proposal of the Textile Ministry to impose a 10 per cent duty on overseas sales of cotton beyond the declared exportable surplus limit.

The proposal was last month referred to the GoM by the Union Cabinet. "India's cotton production has been increasing every year. In such a situation, the GoM has recommended that there should be no restrictions on export of raw cotton and no duty on export. The meeting advocated a free market for cotton and was of the view that any quantitative restriction or export duty would penalise farmers," Mr. Pawar told reporters after the GoM meeting.

The Ministry of Textiles had proposed an export duty of 10 per cent ad valorem at freight on board (FOB) or Rs. 10,000 per tonne, whichever is less, for cotton shipments exceeding the declared or revised exportable surplus. Currently, duty-free cotton exports are permitted after registering contracts with the Directorate General of Foreign Trade (DGFT) and there is no restriction on shipments.

The government announces the exportable surplus of cotton in September each year, factoring in supply-demand estimates by the state-run Cotton Advisory Board. For the 2013-14 marketing year (October-September), the Textile Ministry has estimated total production at 37-37.5 million tonnes and cotton exports at 10 million bales (of 170 kg each). India is the world's second-largest producer and exporter of cotton. More than 70 per cent of the country's cotton exports are to China.

In addition to the Minister of Agriculture, the GoM comprised of Textiles Minster K. S. Rao and Commerce and Industry Minister Anand Sharma among others. The Textile Ministry had maintained the proposal was aimed at putting in place a stable, transparent, production and tariff driven cotton market to balance the interests of stakeholders in the entire value-chain.

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